The year 2023 is expected to be an intriguing time for e-commerce. After a period of rapid adoption during the pandemic, online sales have now started to slow down as Covid-19 cases decrease. However, according to Google, Temasek & Bain, e-commerce remains a significant growth driver in Southeast Asia (SEA), with projected growth at a compound annual growth rate (CAGR) of 17% until 2025, despite the recent slowdown.
Southeast Asian ecommerce growing rapidly, but is the boom sustainable?
Transforming business models to incorporate e-commerce is no longer just a strategy for diversification but has become a crucial revenue driver for sustainable growth. Nevertheless, successfully operating an e-commerce business in SEA, where commerce channels are abundant, can be quite challenging. In this article, we will address key challenges and provide solutions to help you enhance operational efficiency and boost e-commerce sales in SEA.
Challenges for e-commerce brands in SEA
A successful e-commerce business is built upon three fundamental pillars: market understanding, performance understanding, and execution and optimisation. Each of these areas plays a crucial role in driving business growth and success.
Market understanding entails comprehending the external landscape and how your business fits into it. This involves assessing your competitors, identifying market trends, and recognising opportunities for growth.
Performance understanding focuses on analysing internal factors that influence your business’s performance. It involves delving into why certain outcomes occur within your organisation and identifying factors you can control and influence to drive better results.
Execution and optimisation involve taking action based on the insights gained from market and performance understanding. It is about implementing strategies to improve your business operations, enhance customer experiences, and optimise various aspects of your e-commerce operations.
By addressing these three areas systematically, you can establish a solid foundation for your e-commerce business and pave the way for sustained growth and success. Let’s go through one by one to understand the challenges behind each pillar.
In the realm of e-commerce, understanding brand share is a fundamental metric for any e-commerce brand. To succeed in the market, it is crucial to be aware of your competitors, their strategies, products, and campaign approaches. Unlike traditional offline commerce, it is essential to consider grey sellers and unofficial sellers, as your target customers may still engage with them online and make purchases if they perceive the risk as acceptable. Consequently, the online marketplace is generally more competitive. Failing to establish proper measurement and benchmarking mechanisms can result in the loss of your sales share to these sellers and direct competitors. Additionally, it is vital to emphasise the significance of share of search, as monitoring your important keywords that potential customers frequently search for, especially during peak hours or major campaigns, is crucial. Failing to appear among the top results during these critical periods will undoubtedly have a significant impact on your sales performance.
In order to obtain these insights, it is necessary to develop your own crawling system to extract data from public sources. However, establishing a public crawling system using an in-house team or manual methods would be expensive and lack scalability. Platforms have a clear incentive to prevent unauthorised scraping of their websites, leading them to invest significant resources in restricting access to valuable information. Therefore, opting for an in-house team would require additional investment in terms of time and effort to establish and sustain such teams.
Let’s imagine you are the e-commerce manager in Vietnam, where there are four major players: Lazada, Shopee, Tiki, and Sendo. Even a simple question like “What is my real-time revenue for each hour today?” would require significant effort and time. You would need to log in and out of four different seller centres and manually summarise the data in an Excel spreadsheet every hour. The situation becomes even more challenging if you operate under a tiered distribution model, both online and offline, with each partner providing reports in different formats. This makes it difficult to answer even the most basic question mentioned above.
For more advanced questions like assessing the effectiveness of your campaigns or identifying the best campaign in the past three months, the challenges multiply. Each marketplace has its own unique format and structure for presenting campaign performance. For example, a campaign on Shopee operates at the SKU (product) level while Lazada allows you to include multiple SKUs within one campaign. If you want to evaluate your campaign performance today on Shopee, you would need to extract the performance data for each individual SKU, which can be a cumbersome and time-consuming process.
Execution and optimisation
This is a big area to discuss! The operations involved in e-commerce encompass numerous smaller activities, such as
- Inbound management
- Inventory management
- Content listing and optimisation
- Chat management with end consumers
- Campaign management
- Warehouse management
- After-sales management
- Outbound management
Dealing with these aspects can be quite challenging. There is no standardised process across more than 15 marketplaces in Southeast Asia. As a result, even for a basic task like catalogue listing, you would need to assemble a team with extensive knowledge of how to consistently upload catalogues to various retailers while maintaining high content scores for better visibility in the marketplace. Each retailer has specific requirements, including the number of images, image backgrounds, pricing, and discounts, among other things.
How can technology support brands to overcome their challenges?
If your brand intends to tackle these challenges using your internal team, here’s my top advice:
Data collection must be well invested
Managing data from various sources, platforms, and external partners (such as WMS and logistics) can be challenging. To address these three questions, you need to establish a system that incorporates at least three different integrations: a public crawling system, e-commerce platform integration, and external partner integration. Without high-quality data, it becomes difficult to make timely and informed business decisions. That is why you must seriously invest in the first layer. Additionally, when designing your architecture, consider the following factors:
- How many transactions in the peak seasons that you need to process? You will not want to see your system crashing during the mega campaign that your system needs to handle. Ensuring that your system remains stable and does not crash during major campaigns is crucial!
- What is the data frequency that you would like to have to support decision-making in terms of getting data from e-commerce platforms and scraping on their public websites?
- What is the total volume of data that you intend to store?
- How many external partners, such as WMS partner, ERP system, eOMS system, etc., do you plan to integrate with?
- How many concurrent requests do you need to handle to support your operational needs?
Develop a suite of automation tools to fulfil your key needs
These tools can streamline processes, minimise the risk of errors, and enable teams to work more efficiently and deliver greater value. With a solid data foundation, there are numerous possibilities for building automation solutions. Here are a few ideas to get you started:
- Catalogue management: Create a centralised master content repository and distribute it consistently across multiple e-commerce platforms or extract a master catalogue from your ERP system and synchronise it with e-commerce platforms
- Budget Scheduler: For some marketplaces, you cannot set up the daily budget for your campaign on schedule. You can build up a feature to change the daily budget automatically without human intervention.
- Auto RTS (Ready to ship) feature: Change your order status to RTS automatically if you know you have stock in your warehouse already. This ensures no penalties from the platform due to delayed shipments!
There are many ideas to explore, but it’s important to thoroughly understand your business needs before diving into implementing specific solutions.
Analytics & Reporting
Reporting serves as the initial step in identifying issues. A top quality report should provide a comprehensive understanding of your market and performance to guide you and your team to the precise commercial decision-making required to drive growth. Here are a few examples of how we’ve utilised our reports to support our partners:
- Market understanding:
- Market share: Gain insights into brand’s position compared to competitors, enabling effective channel prioritisation and identification of future trends and growth opportunities
- Digital shelf: Monitor, take action, and optimise brand’s presence across various retailers and markets. Identify the most critical actions to enhance performance
- Key competitor tracker: Track the performance of the brand’s official store, comparing key commercial and operational metrics with those of main competitors on leading marketplaces in Southeast Asia.
- Performance understanding:
- Chat agent productivity: Evaluate the strength and effectiveness of chat agents
- Inventory report: Forecast which inventory items need replenishment and identify SKUs that are low in stock, among other insights.
- Commercial performance: Assess how well performance metrics align with targets or key performance indicators (KPIs).
In certain situations, optimising through automation tools may be sufficient. However, if your business is complex, you should consider enhancing productivity through data science and AI techniques.
- Operational optimisation presents numerous use cases where data science can provide support. For instance, it can aid in sales forecasting for identifying the best-selling products, determining potential SKUs to be promoted, optimising warehouse allocation to minimise shipping costs, and more.
- Integrating ChatGPT can assist customer service teams in efficiently responding to queries from end consumers.
- Similarly, leveraging MidJourney can expedite the production of compelling product hero images for content teams.
These examples highlight how AI has the potential to optimise and enhance e-commerce productivity. There are numerous other possibilities worth exploring to drive efficiency and improvement in your specific context.
Technology plays a critical role in e-commerce, as evident from the aforementioned points. Without a suitable technological infrastructure, you will lack control over your sales and inventory, resulting in a weakened connection with consumers and subpar shopping experiences. Additionally, it is essential to consider whether to establish an in-house team or seek an outsourcing partner. Each option has its advantages and disadvantages, and the decision should be based on your specific requirements and budget constraints.
The article “How can technology power brands’ e-commerce growth in Southeast Asia?” was contributed by Hoa Trinh, Chief Product Officer at Intrepid Group.
About the author
Hoa leads the charge to help strengthen Intrepid’s end-to-end e-commerce capabilities and accelerate our partners’ online growth by overseeing every element of technology and product development at Intrepid, from vision to execution, ensuring the delivery of best-in-class value-adding and problem-solving product suite. Bringing a wealth of experience across operation management, product development, financial planning and analysis from industry leaders such as Lazada and Datamart, Hoa is currently based in Ho Chi Minh City and holds a Master of Science in Applied Data Analytics from Bournemouth University.